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If you want to be financially successful and stress free, you should stop tracking your spending – at least for a while.

That’s right. Most financial writers are convinced (and try to convince you) that tracking every penny you spend is absolutely crucial to your financial success.

I’m convinced otherwise.

What is the problem with tracking?

The problem with tracking is that it gets you to focus on the wrong thing. It also helps you completely ignore the most important element crucial to your financial success.

Here’s what I mean.

Often, people who start tracking aren’t able to keep it up or only end up recording only part of their expenses. As a result they eventually give up.

When that happens, they throw the baby out with the bath water and usually stop paying attention to any part of their financial lives.

And even the few people who are successful in tracking their expenses run in to trouble. It’s great that they know where the money is going. But that usually ends up being the extent of their personal finance expertise. They lose sight of the prize - which is usually having enough money to retire.

What is the alternative?

The alternative is to spend as much money as you want on anything you want – as long as you hit your savings goal first. It’s very simple. Let’s say you determine that you need to save $700 every month in order to hit your retirement goals. Set up an automatic investment plan to have that $700 deposited into your account before a dime gets spent on anything else.

If you do it this way you’ll be a lot less stressed about your finances and you’ll be much wealthier too. That’s because you’ll be focused on the right thing and take action where it really counts.

How do you know how much you need to save?

There are several ways to do this. First, you can create your own financial plan for free in about an hour or two. Second, you can use any number of retirement calculators up on the web. Last, you can consult with a financial planner. Just beware that if you go this route, the planner will probably try to get you to use his or her services to make the investments. You might need that service but you might not. There are plenty of turnkey investment plans that are very easy to use and much less expensive than hiring a financial planner.

What if you can’t save that much?

If you don’t think you can save the required amount, you actually should go back over your spending to see what you can cut. This might involve tracking your spending for a while to get the information you need. But you won’t be focused on tracking for tracking sake. You’ll use tracking to reach your goal which is to create the required funds to invest to achieve your objectives. My experience is that people who focus on the monthly investment and savings goals find a way to come up with the cash. They often do go back to tracking their spending but only because they just like to do so and feel more in control of their finances as a result. (I admit that I do track my expenses because it helps me update my financial plan. But my main focus is to hit my monthly investment goal. As long as I do that, I am in good shape.)

Big Side Benefits

People who focus on saving and investing first usually have more fun than those who are focused on cutting spending. They love the experience of hitting their monthly goals. After a while, many challenge themselves to bump up their savings goals and they find a way to hit those goals too. This accelerates their financial independence. Cool.

Another huge benefit is that it completely eliminates money fights at home. My wife and I struggled for years with the issue of saving vs. spending. I lived in financial fear so I wanted to spend nothing and save it all. Thankfully, she was more balanced and wanted to live a little too. By coming up with a monthly investment figure we were both comfortable with, we both got what we wanted.

Budget tracking can be really helpful but only if it’s used to serve a higher purpose. If your ultimate goal is financial freedom, first discover how much you need to save every month and then save that money no matter what. After you do that, spend whatever you want and enjoy it. This is the approach I’ve used and the results have been life changing.